FSJG Index™ Weekly Review
by Frank Barbera
January 27, 2006

General Comments

It was another solid week for the Gold and Gold Stocks. Gold prices edged higher by $4.60 to close at $556.80, while both the XAU and HUI gained ground. For Gold, this week’s advance brought the total to 6 consecutive weeks on the upside, something which has not been seen since October 7, 2005 when Gold pealed off a string of 7 consecutive weeks on the upside. How long can Gold go in one direction without a counter-veiling move? If the past is any guide, (and be aware that a good argument could be made that this time may be different) usually at between 6 to 8 weeks in one direction, Gold is normally set up for pause, be it an uptrend, or a downtrend.

Going back over the last 26 years, there have been only eight instances where Gold has advanced six weeks or more consecutively. They were:

and the present instance, December 23, 2005 thru January 27, 2006 – 6 Weeks and Counting…

As for the Gold Stocks, this week saw both the XAU and HUI recording yet another series of higher closing highs, with the XAU gaining 4.8% and the HUI advancing by a hefty 6.93%. 

Financial Sense Junior Gold Index

While the large cap Golds have performed very well, the real action over the past few weeks has been the Gold Fever hitting the Junior Market. This week alone, the Financial Sense Junior Gold Index (FSJG) soared by 8.19% to close the week at 242.32, up from last week's reading of 223.97. Since its closing low of 153.07 on November 10, 2005, the FS Junior Gold Index is up 58.30% in just 10 weeks !

At present, the Index is not only above the 50-day and 200-day Moving Averages, but is currently above those moving averages by margins akin to those seen at the very important peak in shares prices going back to the high seen on December 1, 2003. Back them the Index closed at a high of 211.48, with the 50-day average at 172.54 and the 200-day average at 122.12. At the time, the FSJG Index was 22.60% above the 50-day average and 73.17% above the 200-day average.

Flash forward to this week and we find the Index at 242.32, some 25.82% above the 50-day average at 192.59 and an even heftier 51.68% above the 200-day average. Not quite the same experience as was seen in early December 2003, but in some ways definitely comparable. On the other hand, it should also be pointed out that between late 2002 and late 2003, the FSJG Index enjoyed a very long stretch where the 50-day average resided above the 200-day average.

At present, the 50-day average has only been trading above the 200-day average for a period of a few weeks, implying there is potential for this to be the early stages of an advance that could be a much larger move. Going forward, the most likely outcome would be for a moderate period of corrective action / consolidation, followed by a resumption of the primary uptrend. As at present, there can be little argument that many of the smaller cap names in the Index are seriously over-extended.

Turning to the sub-components, we see similar “moonshoot” activity with the FSJG Junior Producers Index finishing the week at 254.52, up 6.06% from last week's close of 239.96. The 200-day average for the Junior Producers ended at 177.08.

Financial Sense Junior Gold Index™
Producer Companies

Where Junior Development companies are involved, the FSJG Junior Development Index has been ‘on fire’ for the last 10 weeks, gaining 57.82% from the November 10 lows of 447.26. The Index closed this week at 705.90, up from 667.98 last week.

Finally, Junior Exploration Stocks have also exploded in recent weeks, with the Index now up 75.56% from the November 29 low at 63.93. On Friday, the FSJG Exploration Index ended at 112.24 and that was up from last week's reading of 96.75. It is nearly 64% above the 200-day average at 68.30.

Frank

*Please note that the individual companies in this index are proprietary and will not be disclosed due to compliance and regulatory issues resulting from the relationship of FinancialSense.com, Puplava Financial Services, Inc., Registered Investment Advisor and Puplava Securities, Inc. Member Firm FINRA/SIPC.